All Forum Posts by: K S.

Quote from @Steven Foster Wilson:

Quote from @K S.:

A turnkey home for 100k renting for 1k (1% rule) would net you worse than the stock market 16 years later. I went back through my 1099s and calculated my return and estimated closing costs, federal taxes, capital gains tax, depreciation recapture etc for my coming sale. Also, most people won't mention that many homes need to be renovated before the sale which cost me around $25,000.

SFH: 160k cash + 115k appreciation after sales fees and taxes over 16 years = $275,000 total earned after sale.

S&P: 580k -80,000 capital gains tax = $500,000

If you had a mortage, you'd be worse off and scraping by for the next 30 years, Ouch!, that's no fun to realize 30 years later.

S&P 500 almost doubled the returns of the SFH over the last 16 years yet I still argue with people that financing a turnkey property for investment is a terrible idea but since half the advice on here comes from salesmen or book experts, their best interests aren't being made or tailored to each persons individual needs and goals. Hopefully, new investors read this and help them with their decisions.

If you're still not convinced what you would rather do, remember that the S&P 500 took no skills and a few minutes to set up but the SFH was a lot of work over the years, buying, selling, cashing out, fixing, landlording, not to mention RISK like being sued or insurance not paying out for damages/fire/hail.

Being that the S&P 500 is nearly twice as good, you may need to purchase 4 of these properties at 25% down just to match the S&P (subtracted cashflow. 

Unless I'm mistaken and missed something on the leverage part, one can conclude that multi unit land developers or perhaps section 8 hustlers leveraging themselves to the gills is the only way to beat the stock market without just dumb luck and buying houses in the 2012s.

 This is super interesting, I would agree though, my portfolio in the market has averaged 18% over the last 6 years. I would say Real Estate has more benefits than just appreciation and cashflow though, remember depreciation is also one of the main benefits and can actually save you more then you would earn elsewhere. Thats primialry why I invest in Ohio.

Yes but to put it into perspective though, the S&P over the last 6 or 7 yeas returned 13% and you did not account for cashing out at higher costs than the S&P. After sale, you might only match the S&P or worse depending on other factors about your investment. 

The 1% rule was the gold standard. Now that same house/condo in Austin today rents for .5% of the value while job income has barely budged. You used to break even with 25% down. Now it takes ~50% down to break even in the dozen homes across a few states that I looked at. 

So the next 15 years will be worse than the last 15 years for that same investor.

Quote from @Carlos Ptriawan:

Quote from @K S.:

Quote from @Carlos Ptriawan:

This is sample of high demand land listing in MLS: 445 N 6th St, San Jose, CA 95112.

not even a house, it's just a dirt, purchase 70k, sold 750k. 10X profit. It shows the land value that increased based on demand.

there's no such thing as lucky, you need to do your homework and DD ....

Sure buying land that 10x sounds like an art that you need to know and reaserach like work for the city and have connections about nearby development. This is just another example of if you bought this 10 years ago, you'd be rich but it's all in hindsight. I mean you can do this with notes, with wholesale, with development. It never ends. 

yes but the key is the same, to gain the most highest reward/risk you follow data based on supply/demand , you dont follow advice from BP where to buy, you follow strictly based on data.

Well again, I'm lucky to live in the tightest supplied state in the US. 

Quote from @Carlos Ptriawan:

This is sample of high demand land listing in MLS: 445 N 6th St, San Jose, CA 95112.

not even a house, it's just a dirt, purchase 70k, sold 750k. 10X profit. It shows the land value that increased based on demand.

there's no such thing as lucky, you need to do your homework and DD ....

Sure buying land that 10x sounds like an art that you need to know and reaserach like work for the city and have connections about nearby development. This is just another example of if you bought this 10 years ago, you'd be rich but it's all in hindsight. I mean you can do this with notes, with wholesale, with development. It never ends. 

Quote from @Carlos Ptriawan:

What members don't realize is they only hear people brag about crushing it with little down while nobody comes on here to brag about their underperforming property creating sort of a confirmation bias for the lack of a better term
--->

underperforming definition is when appreciation rate is less than bond yield/national average of inflation
outperforming definition is when appreciation rate is above than bond yield/national average of inflation

This point is well known since 1952.  So you need to find house/zip code that has average appreciation more than 3.5%.
In other word, lets say i'm the laziest investor, what I can do is just by the highest performance real estate by purchase the highest demand zip code. Lock it for ten years and be done with it. It's the land value that's increasing, not the intrinsic value of the home itself. After ten years press sell button.

Would San Diego fit this description?  

Quote from @Rob Block:

KS, were you renting the same house for the same 1K rent the whole 16 years?  Shouldn't the rent have roughly doubled in that time period?

Good question Rob. Yes it started out at about $1000 and slowly at the normal rate of rent apprecaition increased to $2000/month most of that being in the last few years so I'm not benefiting from the $2000 since I just renovated and listed it for sale. Also, the tenants were on a 2 year lease meaning they were locked in at a much lower rate (I now find it pointless to do longer than 1 year leases because they can just renew after 1 year. 2 years only benefits the tenants) and if I needed to move in, I would have to buy them out.

But like I said before, the rent goes up with property values because investors use the rent to valuate the property or whatever. At 2.2% property tax rate in Texas including increase maintenance for an ageing house i.e. fences, roof, tree cutting, increase PM fees, that extra increase in rent is going right out the door. You'll be looking much better if you had a condo in the last few years assuming their HOA didn't go up. Many didn't from what I can tell. One of mine did and the otherrs didn't budge at all.

Another way to ansewer your question is this. If you purchased a used single family home 15 years ago with a 5% return. You will most likely see a 5% return today. I know, myth busted right? Well my taxes trippled while my maintenance not only increased a little, but I had to renovate the property which cost $25,000 before I could even get the $2000/month that my neighbors are seeing. You'll also need to renovate before the sale. Looking at all the comps in the street and I can tell like 9 out of 10 renovated lol but nobody tells you these things. 

Quote from @James Hamling:

Quote from @Carlos Ptriawan:

Quote from @James Hamling:

Ok, let's clarify this point. 

If your NOT using leverage fund's and the principles of investment financing, your NOT real estate investing. Your Real Estate COLLECTING. 

Real Estate Investing is as-much about actions with money, and financing, as it is about the property itself. 

If ya go and saw out 1 of the 4 leg's of your table, is the table bad because it's unstable and wobbles? Or is fault with the idiot who made a table stand on 3 leg's? 

 yes

I copy this from my own excel, this is actual realized investment for 500k house in 2013, rate 3.3% , appreciation 5.75%. Nothing fancy. Invest: 120k.
Gross is 4.8x. If you buy multiple properties on 2009-2013 with the same modelling you make 1 mil from 200k investment.

Now this financial modelling would be different with higher rate.

	Original investments:		$120,000
	Appreciation factor:	105.75%			Rate=3.3%
invest:	year	Price	Actual_LTV	LTV_NoAppr	Rem Balance
$120,000	2013	$520,000	0.1541187885	0.1541187885	$439,858.23
	2014	$549,900	0.2167825787	0.2292475769	$430,691.26
	2015	$581,519	0.2756608659	0.2915113657	$421,217.15
	2016	$614,957	0.3309680303	0.349998692	$411,425.63
	2017	$650,317	0.3829066446	0.4049237767	$401,306.06
	2018	$687,710	0.431668081	0.4564889956	$390,847.44
	2019	$727,253	0.4774330923	0.5048854951	$380,038.42
	2020	$769,070	0.5203724491	0.5502938649	$368,867.25
	2021	$813,292	0.5606474279	0.592884655	$357,321.81
	2022	$860,056	0.5984103808	0.6328189777	$345,389.56
$576,000	2023	$909,509	0.633805217	0.670249017	$333,057.53
4.8x			Return after 10 years

Here is my DATA-DRIVEN look at a "what-if" scenario. One can play with these #'s to figure out what there profit would be now after 15yr investing, or in another 15. Based on REAL results and data.

I don't know any stock who's dividend's when up 70% over 15yr AND the asset value also went up. That fact alone is unique to Real Estate. Appreciation in asset value AND "dividend" payout.  

2007 - $229,970 & 3br rents $1,123

15yr invested- 2023 - $345,000 (+$115,030 / +50%) & 3br rents $1,916 (+$793 / +70%)

30yr invested- 2037 Projections - $517,500 (+$287,530 / +125%) & $3,257 (+$2,134 / +190%)

Great work!. You can also just assume appreciation is going to be 4% (historical average). 

Anyone beating that is just lucky. Therefore, we can assume appreciation is less than bonds and the stock market right off the bat. What members don't realize is they only hear people brag about crushing it with little down while nobody comes on here to brag about their underperforming property creating sort of a confirmation bias for the lack of a better term, when really, it's just dumb luck by virtue of what zip code they happen to live in which kinda proves Mark Crus correct. Most those arguments are illogical.

So what strategy can the lazy investor like myself use in todays market? Well if you have a good 9-5 job and worked on yourself and not just read RE books, you can leverage turnkey properties by putting 50% down to break even. That seems to hold true for many units I valuated in downtown San Diego, Tampa and Austin. 

The lazy investor can hit that 10 property goal and make 120-150k/year in no time. Real Estate doesn't have to be synonymous with hustling, low balling, renovating, high interest cash outs etc. I should write a book called the lazy investor. I mean the few condos I have have only had light bulbs go out in the last 10 years and the HOA takes care of everything else making my insurance much cheaper. Even if it was a wash in the end, it's been stress free. But this SFH house, my gosh am I glad to get rid of it. I don't envy people with empires of single family homes. It's basically a second job.

You mean like this where the kitchen shares a wet wall and is next to the bathroom or reversed with the bathroom sharing the wet wall. This means I need two duplexes on different foundations because I won't be able to put up 4 units in a row like this. 

Quote from @Bruce Woodruff:

I wouldn't use IKEA for anything. It's cheap as heck, just put one together and see how the fasteners work....cheap.

I would go to a) lower end antiques stores (or yard sales), and b) high-end thrift stores (not Goodwill, usually charity run stores like Humane Societies and such have really good donated furniture, plates , etc...

You wouldn't use IKEA but have no problem with yard sales and thrift stores lol. 

Quote from @Steve Vaughan:

It takes a lot of work to beat the S&P unlevered.   

Work sourcing an under market value purchase, doing your own repairs and improvements,  management, sale, etc. 

I only purchased about 25% with cash, but when I did it was because the speed and condition netted a large equity capture going in. 

The potential advantages over the S&P are buying below market value, strategic improvements and favorable leverage.  

Thank you for taking the time to thoroughly outline a real life comparison you experienced @K S.

Why thank you good sir! 

I'll send better photos in a bit. But regarding the mirrored layouts, I'm assuming you mean duplex? I'll create another image with the duplex with shared wet walls in a few hours.